UK house prices rose at a double-digit pace for a tenth consecutive month in August as a lack of supply supported valuations despite rising mortgage rates and intensifying of the cost of living crisis.
Home prices rose at an annual rate of 10 percent last month, down from 11 percent the previous month but marking an uninterrupted double-digit expansion since October, according to the provider of ‘Nationwide mortgages.
The annual growth rate was much faster than the 8.9% expected by economists polled by Reuters.
Nationwide chief economist Robert Gardner said the slowdown so far had been “modest” and, combined with a shortage of stock in the market, meant price growth had “remained firm” .
Prices rose 0.8 percent between July and August, defying expectations that they would be close to stagnating as rising inflation is weighing on household finances and confidence of consumers
Instead, the latest rise took the average house price to a new high of £273,751, up £50,000 on two years ago.
Andrew Wishart, real estate economist at consultancy Capital Economics, said the figures suggested house prices had “managed to maintain some positive momentum despite increasing pressure on household finances”.
Tomer Aboody, director of property lender MT Finance, said that “with less stock on the market . . . buyers have little choice and are therefore overselling to secure a home”.
This is supported by separate data from the Royal Institution of Chartered Surveyors, which showed the average property stock per estate agent branch fell to 35 in July, the lowest level since records began in 1978.
But with mortgage rates rising rapidly and the cost of living crisis deepening, many expect the housing market to cool in the coming months.
Tom Bill, head of UK residential research at estate agent Knight Frank, said the housing market was “playing a slow game of catch-up with the economy”, adding: “As supply continues to increase this fall and mortgage rates rise, demand will increase. soften and annual price growth will fall.”
Data released by the Bank of England this week showed interest on new mortgages rose 18 basis points to 2.33 percent from June to July, the highest level in six years.
It also revealed that mortgage approvals fell below pre-pandemic levels and well below the peak during the pandemic-induced boom, when record interest rates and stronger demand drove transactions and the prices.
“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters,” Nationwide’s Gardner said.
Consultancy Oxford Economics expects UK house prices to start contracting from mid-2023 after a sharp slowdown this year.
Gabriella Dickens, of consultancy Pantheon Macroeconomics, said the rise in mortgage rates had been “too severe at a time when real incomes are falling”, adding: “We find it hard to see a scenario where prices of housing do not drop completely in the second half of the year”.